Noble Energy: The Weakness Won’t Last LongNBL) is not in good shape this year with the stock down due to uncertainty in the oil market. This is evident from its quarterly results, as Noble’s second quarter revenue of $730 million was down 47% from the prior-year period.
However, Noble is focused on production growth despite the weakness in the oil market as I will discuss below, which is not necessarily a bad thing.
Making the right moves
Noble is strategically controlling non-core capital expenditures while generating huge volumes.
In addition, Noble has updated its forecasted sales volume guidance in the range of 360 MBoe/d to 370 MBoe/d, mainly encouraged by superior performance and extended infrastructure in DJ basin. The estimated sales volume grew by 10 MBoe/d compared to the previous guidance.
The overall production for DJ basin is averaging nearly 115 MBoe/d for July and August 2015. The gross Israel gas sales for August 2015 achieved a record of more than 1 Bcf/d coupled with robust volumes in Equatorial Guinea, Marcellus and Texas. Noble is believed to achieve the highest sales volume for the third quarter of 2015 from DJ basin and Texas.
A lower cost structure is another positive
Noble is following a strategy of repositioning its cost structure and deliver cost control all through the organization. It has lowered LOE/BOE to satisfactory levels. NBL G&A declined approximately $50 million compared to 2014. The company is sequentially lowering capital over the quarters with fourth quarter of 2015 capital reduced more than $400 million from the first quarter of 2015.
Therefore, Noble managed to sustain a healthy balance sheet, maintain investment grade credit rating and conclude the second quarter with nearly $5.3 billion in liquidity.
Moving ahead, Noble is expected to be significantly growing its key liquids production from all the major wells across the drilling area amid the weaker international commodity pricing scenario, which is estimated to somewhat add to company’s top line growth being further supported by its continued cost-optimization initiatives.
Noble is utilizing its major competencies including, infrastructure, completion methods and core drilling efficiency. It is consolidating the learning outcomes from the basins to deliver enhanced resource value. The company is rigorously allocating capital while focusing on complete cycle returns.
Going forward, Noble is expanding key productions enabled by its onshore assets and key project ramps in the Gulf of Mexico. Further, the resource major has two significant offshore drilling wells currently under development and comprising of one well located in Cameroon and one in the Falkland Islands, providing extensive new resource prospects.
Noble is strategically expanding the productions at the DJ Basin, Marcellus and Texas while, continuously reducing its onshore lease operating expenditures to drive greater profitability at minimized expenses.
Considering Noble’s improving production profile, it looks like a good investment. Hence, it will be prudent for investors to consider the stock for long-term gains.
Published on Oct 17, 2015By Yaggyaseni Mittra